When Crypto becomes Currency, Latin America Goes Bonkers

August 20th, the Venezuelan Administration unveiled the new shiny "Sovereign Bolivar", in an attempt to quiet the hyperinflation going on in the nation (IMF forecasted the Bolivar to hit "1,000,000% by the end of 2018). Fun side note: The Old Bolivar was so worthless it was used as confetti at baseball games.

Venezuelans

Under The Hood

That sounds fine till you look into the backing of the currency, the CRYPTOCURRENCY named Petro. The Petro is then further backed by a barrel of Venezuelan crude oil 1:1. I'm not even going to touch on the mess of packing a currency into another currency into another currency into a natural resource, Venezuelans may as well be buying their groceries with MBS.

Scam, Scam, Scam

The neighbourhood isn't too fond of the new girl in town, with ICOindex, labelling the Petro a "Scam".

Petro doesn't trade, for all intents and purposes it doesn't exist. The new Sovereign Bolivar is based on a wishy-washy sham of a crypto with an inconsistent white paper trail. The real cherry on top is that President Maduro has made the claim that billions of dollars has been made on the resale of metro. Billions of unaudited dollars, with no paper trail, and the only evidence comes out of the mouth of a president with 0 credibility amongst his own people.

The U.S. has banned the American purchase of Maduro's Petro, and has placed Venezuela under U.S. sanctions and a debt-purchase ban. Things just seem to get worse and worse for Venezuela.Interestingly, the ban on Americans trading Petro seems nonsensical now, as the Petro doesn't even trade, it is a fictional cryptocurrency so far, whose only purpose is to serve as the new Sovereign Bolivar's backing.

Flop of the Year

What we've got here is a currency based on floof and hogwash and is doing nothing but hurting Venezuela and Maduro's image. There is a complete loss of trust in the Venezuelan government, child mortality and malnutrition are rising, and corruption is all over the place. These are not indicators of an oil-rich country like Venezuela, so the shady currency seems out of place.

For the life of me, I cannot figure out a reason for Maduro instituting this fake currency, but whatever the reason, he seems to have shot himself in the foot. What was supposed to be the saviour of the Venezuela the Sovereign Bolivar is instead, a flop embarrassing the Venezuelan economy further. (An achievement in itself considering the ridiculous inflation and humanitarian crises in the country)

 

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